The last several years have been tough for community bankers. Acquisitions, collapse, mergers, and other factors have cut the number of small banks in half since 1985. “The decline in bank numbers, from a peak of more than 18,000, has come almost entirely in the form of exits by banks with less than $100 million in assets, with the bulk occurring between 1984 and 2011,” writes Ryan Tracy for the Wall Street Journal. “More than 10,000 banks left the industry during that period as a result of mergers, consolidations or failures, FDIC data show. About 17% of the banks collapsed.”
I don’t think this is good for Main Street.
Over the years community banks have shared an informal partnership with Main Street business owners as their traditional source of banking services and small business financing. With this as a backdrop, I’d like to suggest a few things that might help smaller banks more effectively compete with their bigger siblings:
- Don’t be afraid of technology: I’m of a generation that didn’t have high-tech calculators or computers in the classroom. Earlier in my career, my favorite high-tech device was my new IBM Selectric typewriter. Today, in addition to multiple computers in my home, a tablet computer, a smart phone, and sundry other tech devices, I would consider myself anything but a Luddite. That said, every piece of technology I use in my life has a purpose and provides value. Community bankers that want to compete with the big boys need to embrace technology that enables them to respond to the needs of their small business customers quicker and more effectively than the other guys. The days of sitting behind the desk waiting for your customers to come to you are over. Community bankers might take a lesson or two from the non-bank lenders and service providers who are very effectively providing small business services right now that would have traditionally been found at the local bank and are using technology to help them do it.
- Efficiency, efficiency, efficiency: Although community banks rely on technology and automation for much of what they do, there are many that are still bogged down using manual process to manage customer relationships, interact with the small business owners in their communities, and provide services. If your bank’s small business loan process is married to an antiquated process of file folders, spreadsheets, and memory, it’s time to join the 21st century. It’s time to look at how work flows through your organization and determine where you can streamline processes, eliminate errors, and increase efficiency. How many opportunities (profits) are lost because they fall through the cracks of a out-of-date approach? Take a look at your core process from the perspective of your customers. You might even want to engage them in the exercise. I’m sure there will be some who would be willing to help you improve.
- Your brand is not what you think it is: It’s not your colors, it’s not your logo, it’s not even what you say you are. Your brand is your values and how you act on those values with every customer and your employees. Almost every community bank billboard I pass to and from the office everyday touts that they are the “relationship” bank in one way or another. It’s a great tag line, but when push comes to shove and the relationships you have with your customers don’t make any difference when the numbers don’t add up, your tagline is a load of…well…you know. What’s more, your customers know it too. Not too long ago I wrote about a community banker who takes her relationships with her customers seriously. I really like her story and believe she’s a great example of what a community banker should be. Your brand is not who you say you are, it’s who you are.
- Are you really customer centered? If you think of your customers as accounts or dollars and cents, you might as well throw in the towel. Do you understand, really understand, the needs of your customers? If your bank is like many around the country, you are likely turning away nine out of every ten small business owners who come through the door looking for a small business loan. If that’s the case, maybe one of the services you should be offering your small business customers is credit counseling. If you really want to differentiate your community bank from the mega bank down the street, you’ll need to spend some time really evaluating the products and services you offer to help your customers and compete with the big guys.
- Do you have the right people? I can’t remember the last time I went into the branch, but I vividly remember the last time I spoke with a teller over the phone. The charming voice on the other end of the line made sure I was taken care of and my transaction was done in a timely manner. I didn’t like the time I spent on hold within their automated answering system. Maybe community banks should evaluate how many of their interactions are in person, online, or on the phone and eliminate technology where they should and implement it where they need to. If community banks act just like big banks, why would Main Street bother with them in the first place. When was the last time you evaluated your customer experience?
I’m not ready to predict the complete demise of community banks, but we’re headed there unless savvy banking entrepreneurs (rare for sure) do something to change the way they interact, partner with, and provide services to the Main Street business owners within their community. What is your bank or financial institution doing to make a difference where you live?